RBI’s Moratorium extension may be negative for NBFCs: Report

The RBI decision to further extend moratorium period to end borrowers may be negative for all NBFCs (including the ones with strong liability franchises) as this would further delay the overall collection and recovery procedure, and stretch the total liquidity cycle for all, a report from a brokerage said on Friday.

According to a quick analysis of RBI decisions done by Emkay Global, the extension of moratorium would further damage financial discipline, especially for small-ticket borrowers and MFIs and may result in bigger problems for sector ahead.

While NBFC may face pressure from delays in recovery of loans, there is no clarity yet over moratorium extension for NBFCs from banks. Most of the large NBFCs stayed away from opting for moratorium; however, they also need to change stance over this. Hence, confusion multiplies now, the brokerage said.

Another worry, the report added, remains over absence of clarity over asset reclassification standstill which is expected to expire on May 31. In the absence of an extension, there could be a large chunk of NPA additions, along with sizeable increase in provision requirement for all lenders.

Read More: https://www.bhaskarlive.in/rbis-moratorium-extension-may-be-negative-for-nbfcs-report/